Raising municipal revenue through air rights: a case study of São Paulo, Brazil

Land value capture (LVC) can be a powerful tool for local governments to finance urban infrastructure and recover part of the unearned landvalue increases that result from public investments or regulations. This helps ensure that the benefits of urban development are reinvested in the city for the benefit of the wider population. São Paulo, the largest city in Latin America, has been a pioneer in implementing LVC. Over the last two decades, the Brazilian city has deployed multiple mechanisms to capture increases in land value. These include two air right tools: the Charges for Additional Building Rights (OODC) – applied throughout the city – and the Certificates of Additional Construction Potential (CEPACs) – tied to special planning zones called Urban Operations (UOs). Both instruments allow the sale of development rights beyond the basic zoning allowance, with the proceeds earmarked for public infrastructure investment. Between 2004 and 2022, these mechanisms generated more than USD 4.5 billion in revenue, equivalent on average to 8% of the city’s annual property tax revenue. Although both instruments aim to monetise “air rights”, their design and impact differ substantially. Drawing on descriptive analysis of administrative and survey data, as well as interviews with developers and policymakers, this case study examines how the two instruments work on the ground, including how they perform in terms of revenue generation, investment, and urban development outcomes. The discussion highlights key considerations and lessons for other cities contemplating the adoption of air rights.